This is a break from our regular travel blog to let you know that if you’re here in the U.S. (or your country’s currency is tied in some way to the U.S. dollar), traveling might become a whole lot more expensive. This has to do with events at the World Economic Forum in Davos a few days ago and current U.S. Treasury Secretary Steve Mnuchin basically not saying he wanted to see a stronger U.S. dollar. What this means is Mnuchin (and Trump’s administration) may back policies that lower the value of the U.S. dollar against other currencies (like the Euro), mostly so things made in the U.S. cost less in other countries and they will buy more. It’s a way of getting other countries to buy more things from the U.S.
Unfortunately, this kind of policy is also going to shaft you as an American traveling abroad. Because while in the big trade picture it means that U.S.-made stuff is cheaper for other countries to buy, it also means your U.S. dollar is going to be worth less when you convert it into Euros, or Swiss Francs, or Canadian Dollars, or Japanese Yen. So for example, if you trade 1 U.S. dollar now for Euros, you would get 0.81 Euros, or 81 Euro cents. When Stoytcho and I started our travels in Europe a couple of months ago, we got 85 Euro cents for 1 U.S. dollar. So now when we exchange currency, we get 4 cents less. That means when we go get a meal for 20 Euros, we’re paying $24.69 instead of $23.80. And this is a small example. Back in 2014, 1 U.S. dollar was worth only 75 Euro cents; if it goes that low again, that 20 Euro meal will be $26.67! That’s almost 3 more dollars (and more than 10%) on top of what we were paying.
Not every travel destination will have this problem, and we can break countries down into three categories: developing nations like Vietnam or Colombia, countries that tie their currency to the U.S. dollar like Ecuador and China, and developed nations like Canada and most Western Europe. In the case of developing nations, the cost of travel is likely to rise but will probably remain fairly affordable because it was so cheap to begin with, so if you’ve got that backpacking tour of Southeast Asia planned, you’re probably fine. Likewise for countries who tie their currency to the U.S. dollar*, their currency will just change with the U.S. dollar and prices should stay about the same–barring any kind of crazy trade war fallout. But the developed nations like Canada, France, Germany, Italy, Japan, and Norway will be way more expensive to visit because they already had comparable prices for things to begin with AND your U.S. dollar will be worth less when converted into the local currency. That $500 USD you planned for 5 days in a hotel could become $550 a few months from now.
In summary, if you’re planning to travel from the U.S., brace for the chance that your money might be worth less. Be prepared and save up some extra.
And on the upside, if you’ve been dreaming of a U.S. vacation, visiting here won’t be as painfully expensive. You’re welcome!
* While I won’t distinguish how countries do this, there are a couple of ways – Ecuador and Panama simply use the U.S. dollar as their primary currency. China does much more complicated stuff to control the price of the yuan against the U.S. dollar, but the outcome is that the yuan generally follows the dollar in short to medium lengths of time.